Javier and Anita Sanchez purchased a home on January 1, 2022, for $852,000 by paying $284,000 down and borrowing the remaining $568,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes marginal tax rate is 32 percent.
Javier and Anita Sanchez purchased a home on January 1, 2022, for $852,000 by paying $284,000 down and borrowing the remaining $568,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes marginal tax rate is 32 percent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
C
Transcribed Image Text:Required information
Problem 14-45 (LO 14-3) (Algo)
[The following information applies to the questions displayed below.)
Javier and Anita Sanchez purchased a home on January 1, 2022, for $852,000 by paying $284,000 down and borrowing
the remaining $568,000 with a 7 percent loan secured by the home. The loan requires interest-only payments for the first
five years. The Sanchezes would itemize deductions even if they did not have any deductible interest. The Sanchezes
marginal tax rate is 32 percent.
Problem 14-45 Part c (Algo)
c. Assuming the interest expense is their only itemized deduction for the year and that Javier and Anita file a joint return, have great
eyesight, and are under 60 years of age, what is the after-tax cost of their 2022 interest expense?
Note: Round your intermediate calculations and the final answer to the nearest whole dollar amount.
After-tax cost of the interest expense
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